The financial crisis and fading government support for climate action have seriously eroded global plans to capture and store carbon, the International Energy Agency (IEA) warned on Thursday.

Sequestration – the depositing of greenhouse gases underground rather than into the atmosphere – was supposed to account for a fifth of the world's emissions reductions under the agency's roadmap for keeping global temperature rise within 2C (4F) by the end of the century.

But delegates including the US energy secretary, Steven Chu, heard at a meeting, held in Beijing, that the global temperature is on course to rise by 3.5C, due to poor progress both on carbon capture and storage, and on acceptance of a carbon price and other carbon-cutting efforts.

IEA deputy executive director, Richard Jones, told the meeting, hosted by the Washington-based Carbon Sequestration Leadership Forum, that this would wreak havoc on human wellbeing. He added that time was running out to avoid this scenario because of slow progress on carbon capture and sequestration (CCS).

"Every year that passes makes it more difficult," Jones said. "With current policies, CCS will have a hard time [being] deployed ... There is less of a global push for climate action, and tighter government finances."

According to the IEA, global energy demand has more than doubled in the past 40 years and even with the most favourable assumptions will grow another 35% by 2035, which will take carbon dioxide emissions above 35 gigatonnes per year.

Projects to capture and bury a major chunk of that are behind schedule and finding it harder to secure funds.

To reach the 2C goal, the IEA estimates there will have to be 1,500 large-scale CCS projects around the world by 2035. However, only 74 have been announced, and the trend is in the wrong direction.

"We're seeing a decline in new projects due to a softening global economy and an uncertain carbon price," said Brad Page, head of the Australia-based Global CCS Institute.

This alone will not be enough. US energy secretary Steven Chu told the meeting the price of carbon would have to be $80 a tonne for CCS to be economically viable with current technology.

But, he continued, the US has yet to even set a price, which makes it difficult for companies to invest and financial institutions to make loans to CCS projects.

"The US needs a price on carbon sooner rather than later," said Chu. "This is something where we are losing time. It is very important that we get moving."

The US has 24 CCS projects – more than any other country – but they are mostly for enhanced oil extraction, which is more economical but has a relatively limited capacity for carbon sequestration.

Delegates said other forms of CCS need more state aid to get going but cash-strapped governments are backing away from financial commitments. Industry representatives said the sector was plagued by delays, doubts and weak policy support.

"Too many projects have fallen by the wayside," said Jeff Chapman, chief executive officer of the CCS Association of the UK. The UK has set aside £1bn for a demo contract but has yet to award it to the single remaining project still running to win a government competition for the funding. The coalition has also committed to building three more CCS plants, one of which will be a gas power station, but has not said where the funding will come from.

China has soared through the global economic crisis with double-digit economic growth but it is cautious about taking the lead with expensive CCS technology. Adoption by the world's biggest greenhouse gas emitter is crucial as China is expected to account for a third of the global growth in emissions over the next 25 years. According to the International Energy Agency's plan to keep carbon dioxide in the atmosphere under 445 parts per million, China should have 270 major CCS projects by 2035. So far it has six at the planning stage. Xie Zhenhua, vice-chairman of the powerful National Development and Reform Commission, said carbon capture and storage was a "last resort" for China.

With little political and financial capital behind CCS, however, its prospects are diminishing. Delegates said commodities firms – who are profiting from the rise in energy prices – should step in.

"Time has been lost as a result of the financial crisis. No one can deny that," said Martin Ferguson, who called on mining companies to make a greater financial contribution to the development of CCS technology. "Coal companies must look at themselves as beneficiaries of the rise in the price of coal."